US and France close to a compromise deal over digital tax, Trump said

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Amid the escalating tension between the U.S. and France over the latter’s proposal to levy a digital tax that would affect tech companies in the U.S, President Donald Trump said, Monday, that the two countries are close to a compromise that would end the animosity between the two economic superpowers.

Trump made the comments as he speaks with reporters during the at the G-7 summit in Biarritz, France, together with Germany’s Prime Minister, Angela Merkel, who said that  OECD (Organisation for Economic Co-operation and Development) are moving to find a solution to the global digital taxation problem by 2020.

Earlier this year, France has voted to impose a 3% tax on companies that earn from digital operations. The tax, which applies to organizations with annual revenues of more than 750 million euros ($830 million) arising from “digital activities,” including 25 million euros ($27 million) made in France, affects big tech companies from the United States including Facebook, Google, and Amazon.

For President Donald Trump, the tax specifically targets “great American companies.” He threatens to impose tariffs on French goods and products over the levy of the digital tax amid the escalating tension between the two countries.

Before leaving for the G-7 Summit last Saturday, Donald Trump said that while he is “not a fan” of tech companies, he said that “those are great American companies and frankly I don’t want France going out and taxing our companies.”

“And if they do that … we’ll be taxing their wine as they’ve never seen before,” he added.

The intensifying row between U.S. and France is not isolated to the two countries, as the EU bloc, which failed to materials its early plan to impose taxes on digital activities of companies, said that they would respond to the U.S. if they punish France over its digital taxation policy.

Donald Tusk, president of the European Council, said on Saturday that the European Union would “respond in kind” if the U.S. imposes tariffs on France over the digital tax plan.

France pushed through with their plan to enact a tax system that would be levied against tech companies who operate in their country, after the failed attempt of the EU to establish a bloc-wide digital taxation policy, last year. Similarly, other European countries are poised to enact their own versions of the digital tax, to follow France’s move. Countries such as the U.K., Italy, and Austria are considering the measure. France said that digital tax would earn the country an annual revenue of 500 million euros.

Last week, U.S. Trade Representative Robert Lighthizer said that they would investigate France’s move to tax digital and tech companies saying that it “unfairly targets American companies.”

“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” U.S. Trade Representative Robert Lighthizer said in a statement announcing the investigation.

The U.S. is looking into whether the digital tax constitutes unfair trade practice from France. Lighthizer said that the “services covered [of the tax] are ones where U.S. firms are global leaders. The structure of the proposed new tax, as well as statements by officials, suggest that France is unfairly targeting the tax at certain U.S.-based technology companies.”

The USTR announced that the investigation was ordered by President Trump, himself. Lighthizer said Trump “has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.”

Lawmakers and other politicians have expressed support over the investigation. Senate Finance Committee Chairman Chuck Grassley, a Republican, and Senator Ron Wyden, the top Democrat on the panel echoed the sentiment that the tax unfairly targets American companies.

“The digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost U.S. jobs and harm American workers,” they said in a joint statement.

“The United States would not need to pursue this path if other countries would abandon these unilateral actions and focus their energies on the multilateral process that is underway,” the statement added.

The tension between the two countries may soon conclude once the compromise agreement is finalized.

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